Sally, or to be precise SALY, (Same As Last Year) has been a much loved friend of accounting firms the world over for the last 100 years. It’s been a familiar, ever so comfortable way of doing business. But for the world’s Big Four firms and perhaps 400-500 of the up-and-coming firms snapping at their heels, SALY has been sidelined and new partnerships are being forged with data technology and AI expertise.
These accounting pioneers are looking forward, identifying ways in which technology can be embraced to provide clients with better, faster, more efficient, and more insightful services than they received the year before. They have a vision to improve on last year, not copy and paste it.
These are exciting times because, for up to a century, we’ve fundamentally carried out audits in a very similar way. We’ve manually gathered information from the client, copied it with a photocopier and set it out on big spread sheets. When Lotus 123 and Excel came along, we didn’t actually change much in terms of process, we just put it in electronic format. And many firms in 2022 are still dependent on simply importing Excel files into analysis tools to carry out an audit.
However, the Big Four are beginning to create a welcome tectonic shift, an acceleration of change and a new dynamic. They are beginning to transform the audit environment, harnessing the power of data to deliver value to clients and a frictionless experience, while at the same time staunching the flow of bright young, tech-savvy graduates to competing professions.
One of the key ways in which technology is transforming the audit process is its ability to have access to current data on a timely basis for companies of any size that is not disruptive to their client. Historically, company audits kicked in at the end of the calendar year with the annual Q1 “busy season” causing burn-out and disillusionment amongst young audit teams as they end up working 60-hour weeks for several months. This old method of “earning your dues” is not working. Today we are seeing accounting firms catching up with their corporate world clients who have already digitized their operations. They are recognizing the value of working with full data sets and the opportunities technology offers to engage with that data not just in Q1 but at regular intervals throughout the year. By using software tools to merge and standardize immense silos of client data, companies like Validis are enabling accounting firms to seriously up their game.
For instance, if an auditor has access to a client’s data feed once a month, he or she can not only close in on the data, but can also get closer to the client and the nuances of their business operation. They can keep a closer look on the dynamics of their clients in a more meaningful and independent way. Are their payables and receivables in line with expectations? Is business slowing down because of nervousness about inflation and post-pandemic recovery – or not? Have government subsidies been correctly accounted for at the appropriate time to maximize benefits and avoid penalties? Is there a particular area of the business being flagged as struggling which can get steered back on course before it’s too late?
For decades, audit teams have been manually counting and checking product, doing “tick and tie”
An example I heard was of a client who manufactures snow shovels. As an auditor, it’s a bit late in February to see that the previous April, there was a late storm across two of the northern US states, triggering a spike in demand for snow shovels. However, if I am keeping monthly tabs on my client’s day-to-day business, I can regularly access data from a weather service that accurately predicts snowfall and incoming storms across the northern US states. This regular feed of data at a granular level, when the weather is actually happening, will help my client ensure that snow shovels are in plentiful supply in stores in the right parts of the country at exactly the right time. By merging this silo of weather data with silos of data on stock levels, raw material reserves and manufacturing capacity, I can combine the data and achieve the kind of business insights that will help my client grow revenue by selling more snow shovels or save money with efficiencies. And of course, these new opportunities for mining data and getting closer to the action of the transactions has further implications for poor old SALY. The more the audit teams can engage with the data in real time and refresh it when it suits, the more they shake up the traditional workflow of an accounting firm and create opportunities for their clients.
For decades, audit teams have been manually counting and checking product, doing “tick and tie” as we call it in the States. But by streaming the data sets, tech-adopting audit teams can now access vast resources of information within minutes, rather than weeks on site, and invest their time in analyzing the data, rather than simply verifying it. And that in turn means identifying opportunities for bringing in the firm’s consultancy or tax teams and ultimately working in a much more holistic way.
It’s win-win three ways. Accessing and standardizing a client’s data transforms the audit process into a means for adding increased value for the client, increased business opportunities for the accounting firm, and increased interest and intellectual challenge for a young audit team.
So, is the transformation of the audit process confined to the staffing resources and budgets of the Big Four? I don’t believe so. They may be leading the charge but smaller, agile firms, maybe young firms who have never even met SALY, are moving fast too. They are attracting the brightest cohorts of digital natives coming out of university and offering them opportunities to not only work on audits on the ground but integrate tech innovations into the process.
The barrier to entry for these technologies has never been so low. It’s not as if we have the costs of inventing the printing press. But maybe, just maybe, we’re about to do something just as seismic.
Access and standardize your client’s data. Transform your audit process.